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Indian Rayon bids for carbon black unit - Views on News from Equitymaster

Indian Rayon bids for carbon black unit

According to newspaper reports, Indian Rayon and Industries Limited is bidding to acquire a carbon black plant belonging to the Korean Steel Company.

Indian Rayon and Industries Limited is a part of the Aditya Birla Group of companies. The company has interests in rayon, textiles and carbon black among other businesses. The company recently sold its cement facilities to group company Grasim Industries.

The Aditya Birla Group is currently undergoing a massive restructuring exercise. Under this, Indian Rayon had to sell off its cement division to Grasim and scrap its sea water magnesia facility. It now seems likely that the company will focus on rayon, textiles and its carbon black businesses.

The carbon black industry has been witnessing intense competition from Southeast Asian manufacturers. However, the recent recovery in the tyre industry has considerably improved the price situation in the industry.

A successful bid by the company will give it a presence in the international markets. Moreover, it will act as a hedge to its domestic business. For example, it could import carbon black from its international plants if the costs of manufacturing are lower there and export from India to capitalise on higher international prices. The acquisition will increase its clout in the domestic market, where the RPG group continues to be the leader.

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